Taking Care of Business

With projected annual sales of more than $9 billion, Kellogg Company is evolving far beyond its core business of being the world's largest producer of cereal. The company has a proven track record for creating and acquiring powerhouse brands away from the breakfast table to include cookies, crackers, toaster pastries, meat alternatives, pie crusts and cones. Its most popular brands include Kellogg's, Keebler, Pop-Tarts, Cheez-It, Nutri-Grain, Rice Krispies and Special K. Branded characters, like Tony the Tiger, keep Kellogg busy stocking retail shelves, however, the company needed much more than a frisky feline or a merry elf to help it seize global opportunities.

In response, the company turned to mySAP.com as the technology platform to enable and streamline its North American business process. This comprehensive SAP backbone, over 5,000 users strong, includes mySAP Supply Chain Management, Business Intelligence, E-Procurement and Customer Relationship Management. Ray Shei, chief information officer for Kellogg, says these solutions will provide the company with the necessary tools to support ongoing business initiatives.

Kellogg's selection of SAP follows the company's March 2001 acquisition of the Keebler Foods Company, also a user of a SAP. Shei says the extensive knowledge he gleaned as the former CIO of Keebler made his decision to invest in SAP at Kellogg a bit easier. "We started implementing SAP around 1994 so my Keebler background was very helpful as I moved into Kellogg," says Shei. "The difference now is that IT is not the only driving force. We do not have IT projects, we have business projects." Shei says the Kellogg IT department serves as a roving business partner, ready to dive in at any given moment to help support a myriad of projects. At Kellogg, IT might not lead every project, but it is the key enabler.

Currently, Project Atlas takes up a majority of Shei's time, a massive undertaking that will replicate Kellogg's North American ERP system on a global scale. Project Atlas teams are currently working in Europe and Latin America. Next in line is Australia and Southeast Asia.

Making It Work
Naturally, a project of this scope and size calls for large amounts of time, money, patience and people. Or does it? Once again, Shei's Keebler background has created a mindset of what he calls "The Perfect Fit", which is essentially a lean, mean, IT machine. "We have had an extremely long history, especially with the Keebler ERP implementation, of having an IT organization that was not large in size and we still structure our operations in this manner at Kellogg," says Shei. "We're fit to the business. We have enough manpower to do projects, maintenance and move the ball forward." Shei admits that the large projects need an additional boost for which he will hire trusted consultants such as IBM. Typically, consultants stick around for the duration of the projects but are released on time and within budget. "We don't want a huge IT organization because at the end of the day, there won't be anything for them to work on," says Shei. "By hiring consultants, it allows us to bring in expertise."

For instance, Kellogg might want insight on how the APO module of SAP operates. Experts will be brought in, their knowledge is transferred to the applicable Kellogg IT personnel. Shei says companies can greatly shorten project implementation times by bringing in experts, a lesson learned while serving time at Sperry Univac. Shei was heavily involved with numerous implementations at Sperry and says the most successful ones happened with the early involvement of outside expertise. "They provide a lot of different views because they have done work at a lot of different companies," says Shei. "If you can take the best of what you see and move that forward every time, you're always going to make it better. Rather than rely completely on our IT staff, we'll bring in consultants and we'll transfer their experiences and knowledge base."

Keeping Costs Down
Kellogg has come to rely on the expertise of IBM and SAP almost exclusively. However, Shei is quick to point out that consultants should never be used as a maintenance crutch. That is why Kellogg deploys a "Best Fit for the Business", an internal metric that gauges how heavy each maintenance load will be.

"When we had legacy systems, maintenance was at 60 percent," says Shei. "On our new platform, which naturally required a few modifications, we're down to 20 percent to 30 percent. You don't need a big staff to do that."

Shei says it is important to have the optimal amount of staff to move the ball forward on any given IT project. At the same time, each project should not cost an arm and leg for consulting fees. "When we bring in a new module or function of SAP or any other application, we like to get involved with the consultants that have done this before and have them transfer that knowledge to the Kellogg team," says Shei. "We just did a PLM implementation with SAP, so we brought in a representative from SAP and a consultant from IBM. They got the ball rolling and our team picks it up and runs with it after that. When we first start out, we're pretty dependent on the consultant as time goes by, they drop off and at the end of the day it's all Kellogg IT."

Tech Supports the Business
As Kellogg starts an IT project, the business will lay a clear foundation of what they want and need. It is at this early stage when Kellogg's business side is heavily involved with the IT organization. As the project moves forward, Shei says the business input will fade and the Kellogg IT organization will work on the solution. Once Kellogg IT feels it has a solid product implemented, the end users are brought back in for final input. This strategy plays a major role in obtaining a high level of user acceptance. "It's huge because they own it," says Shei. "We are nothing more than an enabler, a tool to get their job done and that's what IT is for, first and foremost. Kellogg doesn't market IT, they market cereals and snacks and we're here to service the business."

The Big Sister
Shei has also made it his mission to ensure that all critical business applications will be supported exclusively by the Kellogg IT organization. "We really don't outsource anything. When it comes to a project, we have a different approach that we call a 'Sister Plant Resource.'" It was in 1995 when Kellogg first hit upon this idea. In a nutshell, Sister Plant means that another peer, or another plant controller, sits next to the plant controller where the solution is being implemented instead of an IT person. "It's not IT's specialty to sit next to a plant controller," says Shei. "When we implement the first of any function we train those initial project people heavily."

The Valuable Resources
Kellogg is currently implementing in Europe, for instance, therefore a lot of U.S. and Canadian resources that have experience with plant implementation spend time at various locations in the U.K. to share experiences. This frees Kellogg IT to do actual IT work that allows them to hone in on the business objectives. "The Sister Plant concept has been our saving grace," says Shei. "It's a concept we use across the board, for finance, order management, customer service, you name the department, we use it. It works fantastic."

Kellogg's track record for implementing is very fast-paced. The Sister Plant concept and the engagement of the business, supports Kellogg's implementation effectiveness. "Also, it helps to have one of the finest IT organizations in the world, which I believe we have," says Shei. "There's an old saying I use wherever I go and that is that this IT organization does not need a CIO. The management team technicians here are extremely good. I am very fortunate to be the CIO of this organization." Shei says it is not uncommon, for instance, to have a manufacturing IT staff member lend a hand in order management. "Every one of my direct reports help each other out," says Shei.

Sometimes the workload will shift where one team will take on a heavier workload for a while. They're accustomed to moving resources around on their own and the CIO has very little to do with that."

The Value of One
The worldwide use and acceptance of SAP is undeniable. Beyond the fact that it is a large entity with a lot of equity, Shei says SAP, if used to its full potential, is a fully integrated ERP system. "At the end of the day it makes an organization be more disciplined to handle things," says Shei. "Every transaction has an off-setting transaction and you hope at the end of the day everything comes out to zero. That's when you've got a really good system. The data flow that you get within SAP is huge due to the broad base that it covers."

Shei estimates that 90 percent of Kellogg's IT is running off SAP and he says he prefers this methodology. "We have one vendor to go to. They are very supportive, respond well and the system rarely has any hiccups. The beauty of one vendor reduces the need for additional bolt-on apps and also reduces finger pointing due to applications that do not work together."

Products of Invention
When it comes to battling out-of-stocks, Shei says Kellogg tries to make sure the right product is available at the right time and at the right price. The backbone of making sure this transpires is a solid forecasting system. Kellogg is tapping SAP's CRM solution to help address inventory and stock issues at retail. This solution spans Kellogg's different product divisions, including morning foods, snacks division, frozen and natural. Each division is unique. Morning foods relies on a warehouse-delivery system, whereas snacks is powered by direct store delivery. Shei first considered a comprehensive CRM solution in late 2003 and realized that even though SAP's CRM solution wasn't as mature as other offerings, it still made perfect business sense to invest in the program. "At any time, if there is an SAP solution that is an 85 percent fit, we will always use SAP," says Shei. "CRM from SAP was far below the 85 percent level. Still, they are moving along very quickly and we are very happy with the progress they have made."

Beyond CRM
Beyond investment in solid CRM technology, Shei says it is vital to get down to the sales force to learn what is taking place in the field. Kellogg sales teams are currently armed with hand held units powered by custom applications created in-house. Hand held experts at Kellogg mirrored sales people to learn how they operated, in order to best suit their needs. Software was mocked up, working sessions took place and the custom tailored hand helds were soon operating within Kellogg's sales force. This pen-based unit is currently in use throughout the United States with plans to expand into other areas.

Eye Towards the Future
Even though Kellogg is currently involved in a very heavy implementation stage, Shei says his team still keeps a close watch on what is coming down the pike. It comes as no surprise then, that Kellogg is involved with different RFID pilots.

"We're very interested to see where it is going," says Shei. "We're making a stronger commitment with Wal-Mart to see what a test will look like and what the results are. It's one of those things you have to be careful about. It's better to walk than to run."

Kellogg will not only use the RFID capabilities offered by SAP, but the company will also try to help make an impact on SAP's success with the fledgling technology. "When you embark upon any type of cutting edge technology, you have to be careful about who you pick to be your partner," says Shei. "In the case of our RFID partnership with SAP, we will share our findings with them and vice versa."

Above all, Shei says high customer satisfaction is vital for current and future growth at Kellogg. "You want that index to be as close to 100 percent as you can get it, because it hits the heart of the IT department," says Shei. "The IT department always needs to ensure that the data that the end users are seeing is accurate and true. Everywhere down the line it is IT's core responsibility to make sure that the data is solid."
At the end of the day, that is
what taking care of business is
all about.